China Steel Corp (CSC, 中鋼), the nation’s largest and only integrated steelmaker, is expected to increase its product prices for deliveries in the second quarter of next year by between 5 percent and 8 percent, taking a cue from climbing global steel prices, Yuanta Securities Investment Consulting Co (元大投顧) said.
CSC last month hiked steel prices by 12.6 percent for deliveries in the first quarter of next year, citing rising material costs.
“The adjustment was better than our previous expectations, driven by a price rebound of feedstock and downstream restocking demand,” Yuanta analyst Leo Lee (李侃奇) said in a client note on Wednesday last week.
As the rise in steel prices only reflected about 60 percent of the increase in material costs, CSC is expected to further raise steel prices for shipments in the second quarter of next year, he said.
The uptrend in steel prices would help drive earnings growth for the steelmaker during the first half of next year, the note said.
“We have raised our forecast of the company’s earnings per share by 13 percent to NT$1.52 next year, due to a better gross margin assumption,” Lee said in the note.
CSC shares yesterday dropped 0.19 percent to close at NT$25.65 in Taipei trading, while the benchmark TAIEX fell 0.15 percent.
Yuanta also held a positive view of the nation’s downstream steelmakers, including Yieh Phui Enterprise Co Ltd (燁輝), Taiwan’s largest zinc-galvanized manufacturer.
Demand for steel products is driven by an expectation of a further price increase from CSC, Lee said, citing growth of domestic hot-rolled and cold-rolled shipments of 3.6 percent and 24.6 percent respectively in the first three quarters of this year.
The growth momentum is expected to continue from the fourth quarter of this year to the first quarter of next year, the note said.
Lee said Taiwanese steel manufacturers are likely to benefit from improving demand in both the US and China in the beginning of next year.
Steel demand in the US is forecast to grow by 2.9 percent annually next year, the highest level among developed countries, World Steel Association data showed.
The supply-demand balance is expected to further improve in the Chinese market next year, as Beijing reached its annual steel capacity reduction target at the end of October, the note added.
